A STAGGERING one in four homeowners in Spain could be in negative equity by the end of the year.

Spanish house prices are set to plummet even further this year, leaving a quarter of homeowners owing more than their properties are worth. The problem is set to worsen as the government forces banks to sell real-estate holdings.

The latest figures reveal house prices will decline by as much as 12% to 14%, marking the biggest fall since the National Statistics Institute started tracking values in 2007.

It comes after Economy Minister Luis de Guindos gave lenders two years to make €50 billion of additional provisions for losses linked to real estate, forcing banks to sell assets cheaply.

“There will be more serious price drops this year because of the government decree,” said Fernando Rodriguez de Acuna Martinez, a partner at Madrid-based firm RR de Acuna.

“Banks are now prepared to incur big losses on real estate to shift all they can.”

Already Banco Santander, Spain’s largest lender, and Caixa Bank, the fourth-largest, are offering homes at discounts of as much as 50%.

Prime Minister Mariano Rajoy hopes the overhaul will help bolster confidence in the country’s banks without undermining a drive to tackle its budget deficit.

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